The latest mortgage fraud scam known as “flopping” has sellers who actually make their home look undesirable so that they can attract low offers from buyers.
Here’s how it works: The seller is underwater on their mortgage and wants to get the lender to agree to a short sale. The seller, working with an accomplice, seeks to get a super low price to sell their home in the short sale by making bogus damage claims. Once they get the bank to agree to a short sale, the home is sold to an accomplice who then quickly cleans up the home and resells it for a profit.
“Floppers,” as they’re known, average a $55,000 profit from the quick flips.
To get the low home price, some sellers will go to great lengths to make their homes look undesirable, even spreading possum urine around the house or turning up the heat and closing all the windows for several days, says Ann Fulmer, a mortgage fraud specialist with Interthinx. Floppers also have bene known to remove appliances and cupboard doors and even paint the ceilings so it looks like there’s been water damage in he home. When no sellers want the home due to the flaws, the sellers will point out to the bank the problems with the home and why the sales price needs to be lowered. Some scammers have even claimed their homes were contaminated as crystal meth labs in order to get a lower price.
Freddie Mac is cracking down on floppers, investigating suspicious cases, and has opened up a toll free number for others to report suspicious activity: 1-800-4fraud8.
Source: “Latest in Mortgage Fraud: Flopping,” CNNMoney (Oct. 23, 2012)
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